How to Use Credit Cards Wisely


Credit has become pretty much a necessity of modern life. Even if you are able to pay for all of your purchases with cash, would you really feel safe carrying all that currency around with you? Not to mention how stuffed your wallet gets. Credit cards can make it easy for you to keep track of your spending with those monthly statements they send you tracking your purchases (a perk you just don't get with cash), and paying with credit also makes it much easier to dispute any charges for merchandise that doesn't arrive or is defective. Not to mention those rewards you can earn if you carry the right cards! Still, it is undeniably true that credit cards also make it much easier for us to overspend. Who among us has not suffered a bout of post-holiday blues triggered by an overlarge Visa or Mastercard bill? There are, however, a few simple steps you can take to get control over your credit card use and make sure you get the maximum benefits without running into trouble.

Things You'll Need

  • Credit cards
  • Money to make the payments (plus a little bit more)
  • A small amount of will power and patience
  • Pay your bills as soon as they arrive. If you carry a balance, interest accumulates every single day, so the sooner you pay, the lower your balance.

  • Try to pay more than the minimum balance. The more you are able to pay down, the lower your monthly minimum payment will be, but if you are used to paying, say, $200 a month on a particular card, keep making that $200 payment even when the minimum drops down to $175.

  • Use only one rewards card. This way, you will accumulate the maximum amount of points instead of having them spread out over several cards, thus making it much slower for you to accrue enough points to earn a reward.

  • Transfer higher-rate balances to a lower-rate card, then stop using the higher-rate card. It is much easier to manage your debt if you have one card (preferably a rewards card) that you use and make every attempt to pay off each month. If, like most of us, you have a certain amount of revolving debt that you just can't pay down all in one lump sum, move that debt to a zero or low-balance card, then make payments toward it but do not make any purchases with that card. The purchases would all be charged at a much higher interest rate, yet any payments you made would be applied to the original zero-balance debt so the interest-earning debt would be allowed to accumulate over the life of the balance.

Tips & Warnings

  • Watch out for transaction fees when you transfer balances--these tend to be 3 percent of your balance, which can get pretty high if you are transferring thousands of dollars.
  • Be careful about using the checks that your credit card company may send you, as using these checks also incurs fees and often high interest rates since these are seen as being a type of cash advance.
  • Mind the payment deadlines--if you make a late payment, not only will you have to pay a fee ($39 is typical), but your interest rate may increase to the maximum possible--this is especially bad if this is your balance transfer, formerly 0 percent rate card.

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